Iran has an elected president, parliament (or Majlis), and an "Assembly of Experts" (which elects the Supreme Leader), and local councils. According to the constitution all candidates running for these positions must be vetted by the Guardian Council before being elected.

In addition there are representative elected of appointed organizations (usually under Supreme Leader's control) trying to "protect the state's Islamic character".[1]

The early days of the revolutionary government were characterized by political tumult. In November 1979 the American embassy was seized and its occupants taken hostage and kept captive for 444 days because of support of the American Government to Iranian dictator Sha. The eight-year Iran–Iraq War killed hundreds of thousands and cost the country billions of dollars. By mid-1982, a succession of power struggles eliminated first the center of political spectrum and then the Republicans[2][3][4] leaving the revolutionary leader Ayatollah Khomeini and his supporters in power.

Iran's post-revolution challenges have included the imposition of economic sanctions and suspension of diplomatic relations with Iran by the United States because of the hostage crisis, political support to Iraq and other acts of terrorism that the U.S. government and some others have accused Iran of sponsoring. Just like every third world countries, Emigration has cost Iran millions entrepreneurs, professionals, technicians, and skilled craftspeople (and their capital)." [5][6] For this and other reasons Iran's economy has not prospered. Poverty rose in absolute terms by nearly 45% during the first 6 years since Iraqi invasion on Iran started. [7] and per capita income has yet to reach pre-revolutionary levels when Iraqi invasion ended in 1988.[8][9]

The Islamic Republic Party was Iran's ruling political party and for some years its only political party until its dissolution in 1987. After the war, new reformist/progressive parties had started to form. The war-torn country had no functioning political parties until the Executives of Construction Party formed in 1994 to run for the fifth parliamentary elections, mainly out of executive body of the government close to the then-president Akbar Hashemi-Rafsanjani. After the election of Mohammad Khatami in 1997, more parties started to work, mostly of the reformist movement and opposed by hard-liners. This led to incorporation and official activity of many other groups, including hard-liners. After the war ended in 1988, reformist and progressive candidates won four out of six presidential elections in Iran and Right-wing nationalist party of Mahmoud Ahmedinejad won two time.

The most powerful political office in the Islamic Republic is that of the Supreme Leader, of which there have been two: the founder of the Republic, Ayatollah Ruhollah Khomeini, and his successor, Ali Khamenei. Supreme Leader is appointed and supervised by Council of Experts which is a democratically elected body. Supreme leader is the Head of State with some Executive powers related to Defense, Religious affairs and Guardian Council(equivalent to Constitutional Court of Turkey).

Historically the Supreme Leader has remained aloof from election politics. However, in the 2009 election, some of the pronouncements by Ali Khamenei were perceived by many to favor the incumbent candidate.

The Leader appoints the heads of some powerful posts - the commanders of the armed forces, the director of the national radio and television network, the heads of the major religious foundations, the prayer leaders in city mosques, and the members of national security councils dealing with defence and foreign affairs. He also appoints the chief judge, the chief prosecutor, special tribunals and, with the help of the chief judge, half of the 12 jurists of the Guardian Council(Constitutional Council)– the powerful body that decides both what bills may become law and who may run for president or parliament.[10] Also according to Iranian constitution the Supreme Leader asserts the authority of the president. He can veto the laws made by the parliament and legally he permits for presidential candidates to proclaim their candidacy.Also the declaration of war and peace is to be made by the Supreme Leader together with a two third majority of the Parliament

The Constitution defines the President as the highest state authority after the Supreme Leader. The President is elected by universal suffrage, by those 18 years old and older,[11] for a term of four years. Presidential candidates must be approved by the Council of Guardians prior to running. After being elected, the president must be appointed by the Supreme Leader. The President is responsible for the implementation of the Constitution and for the exercise of executive powers, except for matters directly related to the Supreme Leader. The President appoints and supervises the Council of Ministers, coordinates government decisions, and selects government policies to be placed before the legislature. Currently, 10 Vice-Presidents serve under the President, as well as a cabinet of 21 ministers, who must all be approved by the legislature. Unlike many other states, the executive branch in Iran does not control the armed forces. Although the President appoints the Ministers of Intelligence and Defense, it is customary for the President to obtain explicit approval from the Supreme Leader for these two ministers before presenting them to the legislature for a vote of confidence.

The Parliament of Iran, or Majlis, comprises 290 members elected for four-year terms. The Parliament drafts legislation, ratifies international treaties, and approves the national budget. All Parliament candidates and all legislation from the assembly must be approved by the Council of Guardians.

The Guardian Council (constitutional council) is composed of 12 jurists, including six clerics appointed by the Supreme Leader, and six jurists elected by the Parliament Majles from among the Muslim jurists nominated by the Head of the Judicial System. The Council interprets the constitution and may reject bills from parliament deemed incompatible with the constitution or Sharia (Islamic law). These are referred back to parliament for revision. In an exercise of its authority, the Council has drawn upon a narrow interpretation of Iran's constitution to veto parliamentary candidates.[citation needed]

As of the early 1990s, the Guardian Council vets candidates for national election in Iran mostly due to high candidacy rate in elections. There were more than 6000 candidates standing for the 2013 Presidential election in Iran, but only the six most qualified candidates were approved by the council.[citation needed]

According to the CIA World Factbook, The Guardian Council is a part of the Executive branch of the government.[12]

The Expediency Council has the authority to mediate disputes between the Parliament and the Guardian Council (constitutional Council), and serves as an advisory body to the Supreme Leader, making it one of the most powerful governing bodies in the country.

Its members include heads of the three government branches, the clerical members of the Guardian Council and various other members appointed by the supreme leader for three-year terms. Cabinet members and parliamentary leaders also serve as temporary members when issues under their jurisdictions are under review. [13]

The Supreme Leader appoints the head of the Judiciary, who in turn appoints the head of the supreme court and the chief public prosecutor. There are several types of courts including public courts that deal with civil and criminal cases, and "revolutionary courts" which deal with certain categories of offenses, including crimes against national security. The decisions of the revolutionary courts are final and cannot be appealed. The Special Clerical Court handles crimes allegedly committed by clerics, although it has also taken on cases involving lay people. The Special Clerical Court functions independently of the regular judicial framework and is accountable only to the Supreme Leader. The Court’s rulings are final and cannot be appealed.

The Assembly of Experts, which meets for at least two days, twice annually,[14] comprises 86 "virtuous and learned" clerics elected by adult suffrage for eight-year terms. Based on the laws approved by the first Assembly, the Council of Guardians has to determine candidates' eligibility using a written examination. The Assembly elects the Supreme Leader and has the constitutional authority to remove the Supreme Leader from power at any time. As all of their meetings and notes are strictly confidential, the Assembly has never been known to challenge any of the Supreme Leader's decisions.

Groups that generally support the Islamic Republic include Ansar-e Hizballah, The Iranian Islamic Students Association, Muslim Students Following the Line of the Imam, Islam's Students, and the Islamic Coalition Association. The conservative power base is said to be made up of a "web of Basiji militia members, families of war martyrs, some members of the Revolutionary Guard, some government employees, some members of the urban and rural poor, and conservative-linked foundations."[15]

opposition groups include the Freedom Movement of Iran and the Nation of Iran party;

armed political groups that have been almost completely repressed by the government include Mojahedin-e Khalq Organization (MEK), People's Fedayeen, Democratic Party of Iranian Kurdistan; the Society for the Defense of Freedom.

The military and the Corps of the Guardians (often mistranslated as guards) of the Islamic Revolution (or Sepaah in Persian meaning the Corps) are charged with defending Iran's borders and Baseej (Persian for Mobilization) militia are charged with maintaining both external and internal security.

Local councils are elected by public vote to 4-year terms in all cities and villages of Iran. According to article 7 in Iran's Constitution, these local councils together with the Parliament are "decision-making and administrative organs of the State". This section of the constitution was not implemented until 1999 when the first local council elections were held across the country. Councils have many different responsibilities including electing mayors, supervising the activities of municipalities; studying the social, cultural, educational, health, economic, and welfare requirements of their constituencies; planning and coordinating national participation in the implementation of social, economic, constructive, cultural, educational and other welfare affairs.

Iran's projected oil and gas projected revenues by the International Monetary Fund. Officials in Iran estimate that Iran's annual oil and gas revenues could reach $250 billion by 2015 once the current projects come on stream.[24]

As of 2010, oil income accounts for 80% of Iran's foreign currency revenues and 60% of the nation's overall budget.[26] Any surplus revenues from the sale of crude oil and gas are to be paid into the Oil Stabilization Fund (OSF). The approved "total budget", including state owned commercial companies, was $295 billion for the same period.[27]

National Budget Expenditures for Social and Economic Purposes, Fiscal Year 2004. Government spending as percent of total budget was 6% for health care, 16% for education and 8% for the military in the period 1992–2000 and contributed to an average annual inflation rate of 14 percent in the period 2000–2008.

Because of changes in the classification of budgetary figures, comparison of categories among different years is not possible. However, since the Revolution the government's general budget payments have averaged:[25]

59 percent for social affairs,

17 percent for economic affairs,

15 percent for national defense, and

13 percent for general affairs.

For a breakdown of expenditures for social and economic purposes, see attached chart.

In FY 2004, central government expenditures were divided as follows:[25]

current expenditures, 59 percent, and

capital expenditures, 32 percent.

Other items (earmarked expenditures, foreign-exchange losses, coverage of liabilities of letters of credit, and net lending) accounted for the remainder.

Among current expenditures, wages and salaries accounted for 36 percent; subsidies and transfers to households accounted for 22 percent (not including indirect subsidies). Earmarked expenditures totaled 13 percent of the central government total. Between FY 2000 and FY 2004, total expenditures and net lending accounted for about 26 percent of GDP.[25] According to the Vice President for Parliamentary Affairs, Iran's subsidy reforms would save 20 percent of the country's budget.[28]

The budget for Iranian year 1389 (2010–2011), which starts on March 21, amounts to $368.4bn, representing an increase of 31 per cent on the previous year and is based on a projected oil price of $60 a barrel compared with just $37.50 last year.[37]

The public budget was $165 billion (1,770 trillion rials) in Iranian year 2011-2012. The Iranian Parliament also approved a total budget of $500 billion (5,170 trillion rials) that factors in $54 billion from price hikes and subsidy cuts and aside from the government (or public budget) also includes spending for state-owned companies.[39][40] The budget is based on an oil price of $80 per barrel. The value of the US dollar is estimated at IRR 10,500 for the same period. the 2011-total budget shows a 45-percent increase compared with that of 2011 which stood at $368 billion.[41]

The proposed budget for 2011–2012 amounts to 5.1 quadrillion rials (approximately $416 billion).[42] The funding for running the government has been decreased by 5.6 percent and the government's tax revenues have been envisaged to rise by 20 percent.[42] The defense budget shows an increase of 127 percent. The government also is seeking higher sums for development, research, and health projects.[43] Approved budget of 5,660 trillion Rials $477 billion is based on an oil price of $85 per barrel and the average value of the U.S. dollar for the fiscal year has been projected to be 12,260 rials, allowing the government to gain $53.8 billion from subsidy cut.[44] The approved total state budget figure shows an 11% increase in Rial terms, in comparison to the previous year's budget. Of this amount, $134 billion relates to the government's general budget and the remaining $343 billion relates to state-owned companies and organizations. Of the $134 billion for the government's general budget, $117 billion relates to operating expenditure and $17 billion is for infrastructure developments. The government's general budget for 2012–13 shows a 3.5% decline in comparison to the previous year, while the budget for state-owned companies and organisations has risen by 18.5%. Revenues from crude oil make up 37% of the state's total revenues in the budget. Revenues from taxes have been projected at 458 trillion Rials ($37 billion), which shows a 10% increase year-on-year.[45] In the first half of 2012, Iran announced in Majlis that it has taken in only 25% of its budgeted annual revenue.[46] According to Apicorp, Iran needs oil to average $127 a barrel in 2012 for its fiscal budget to break even.[47]

In May 2013, the Iranian parliament approved a 7.27-quadrillion-rial (about $593 billion) national budget bill for 2013–14. The new national budget has forecast a 40% drop in oil revenues compared to the previous year's projected figure. The bill has set the price of oil at $95 per barrel, based on the official exchange rate of 12,260 rials for a U.S. dollar, which has been fixed by the Central Bank of Iran.[48] The budget law also includes income of 500 trillion Rials from the subsidies reform plan. Out of this amount, 410 trillion Rials is allocated for direct cash handouts to those eligible who have registered and for social funds.[49]

Iran's earmarked government spending for the year starting in March 2014 at $75 billion, calculated on an open-market exchange rate, with an overall/"total" budget ceiling estimated at about $265 billion. The draft budget estimates oil exports at about 1.1 million barrels per day (bpd). The 2014 budget assumes an average oil price of $100 per barrel, inflation at 21%, GDP growth at 3% and the official USD/IRR exchange rate at 26,000 Iranian rials.[50][51][52][53] The budget bill permits the government to use more than $35 billion in foreign finance.[54]Capital expenditure is set to rise by 9.7%.[55] The administration has set the goal of 519 trillion rials, (about $20.9 billion) government's income from implementation of the subsidy reform plan in budget bill and will be likely forced to double fuel prices.[56] In February 2014, Parliament approved a total budget bill worth 7,930 trillion rials ($319 billion at the official exchange rate).[57] The International Monetary Fund has estimated Iran needs an oil price above $130 a barrel to balance its 2015-state budget; Brent crude was below $80 a barrel in November 2014. The IMF estimated in October 2014 that Iran would run a general government deficit of $8.6 billion in 2015, at the official exchange rate, to be compensated by drawing on the National Development Fund.[58]

Iran's 2015 proposed budget is nearly $300 billion. The overall/"total" budget shows a 4% growth compared with the 2014 budget. The budget assumes that the country exports 1 million barrels per day of crude oil and 0.3 million barrels per day of gas condensates at an average price of $72 per barrel of crude.[59] The official exchange rate is projected to be on average 28,500 USD/IRR.[60] Dependency on oil exports in this overall budget bill has dropped to 25% (down from over 30% of government revenues in 2014.)[61] The plan is to increase taxation on large organizations by reducing tax evasion/exemption. The Iranian state is the biggest player in the economy, and the annual budget strongly influences the outlook of local industries and the stock market. The 2015 budget is not expected to bring much growth for many of the domestic industries.[60][62] An average oil price of $50 for the coming year would result in a deficit of $7.5 billion. The government can lower this deficit by increasing the official exchange rate but this will trigger higher inflation.[63] The proposed expenses are $58 billion including $39 billion is salary and pension payments to government employees. Proposed development expenditure amounts to $17 billion.[63]R&D’s share in the GNP is at 0.06%[verification needed] (where it should be 2.5 % of GDP)[64] and industry-driven R&D is almost non‑existent.[60]

Iran's complex and unusual political system combines elements of a modern Islamic theocracy with democracy. A network of elected and unelected institutions influence each other in the government's power structure.

According to the constitution, the Guardian Council oversees and approves electoral candidates for most national elections in Iran. The Guardian Council has 12 members, six clerics, appointed by the Supreme Leader and six jurists, elected by the Majlis from among the Muslim jurists nominated by the Head of the Judicial System, who is appointed by the Supreme Leader. According to the current law, the Guardian Council approves the Assembly of Experts candidates, which in turn supervise and elect the Supreme Leader.